Restaurant LLC Operating Agreement

by Louis Kroeck, Demand Media

LLC agreements give you a guide for handling major business decisions.

Jupiterimages/Photos.com/Getty Images

Once you have registered your restaurant as a limited liability company, you will need to draft an LLC operating agreement to dictate the terms of how your business will be run and the process for making business decisions. All members of your LLC and any investors should be consulted when forming your LLC operating agreement as that operating agreement will affect their rights.

Limited Liability Company

An LLC is a type of business entity available in every state in the United States. LLCs allow their members to limit personal liability in regards to debts incurred by their business. It is possible to form a single member LLC and if your restaurant is registered as a single member LLC you may consider operating your LLC without an operating agreement as operating agreements are typically intended to govern the relationship between the members of the LLC.

Financial Structure

Your LLC operating agreement will define the financial structure of your restaurant. The agreement should identify who has made capital contributions to the restaurant including any contributions such as kitchen appliances and restaurant furniture. The operating agreement should also specify how members of the LLC will share in the profits and losses of the restaurant. Typically, the amount of profits and losses a member is entitled to will depend on the level of their capital or equipment contributions.

Management

In addition to your financial structure, your LLC operating agreement should define the management structure of your restaurant. Although it is possible for all members of the LLC to share equally in the management of the restaurant, in many instances it is preferable to hold one member responsible for managerial duties in order to avoid management conflicts. Additionally, your operating agreement should dictate the voting rights of members, when meetings will be held and how any potential disputes will be resolved.

Default Rules

Every state has a set of default rules that dictate the terms of business relationships unless the parties agree otherwise. Be sure to check the default rules in your state to determine if you wish to alter those rules in your LLC operating agreement. Typical default rules include state laws as to the addition or removal of LLC members and state rules as to equal distribution of profits.

About the Author

Louis Kroeck started writing professionally under the direction of Andrew Samtoy from the "Cleveland Sandwich Board" in 2006. Kroeck is an attorney out of Pittsburgh, Pennsylvania specializing in civil litigation, intellectual property law and entertainment law. He has a B.S from the Pennsylvania State University in information science technology and a J.D. from Case Western Reserve University in Cleveland, Ohio.

Photo Credits

Have Feedback?

Thank you for providing feedback to our Editorial staff on this article. Please fill in the following information so we can alert the Small Business editorial team about a factual or typographical error in this story. All Fields are required.